Equestrain Roads sold $80,000, of goods and accepted the customer's $80,000 10%,1-year note payable in exchange. Assuming 10% approximates the market rate of return, how much interest would be recorded for the year ending December 31 if the sale was made on June 30?

Question

Quizplus · Accepted Answer

The note payable is for $80,000 and has an interest rate of 10% per year. Since the sale was made on June 30, only half of the year has passed until December 31. Therefore, the interest expense for the year ending December 31 would be half of the annual interest rate:

$80,000 x 10% x 1/2 = $4,000

So, the correct answer choice is (C) $4,000.

Equestrain Roads Sold $80,000, of Goods and Accepted the Customer's